A type of loan available to homeowners aged 62 and older, reverse mortgages allow people to borrow money based on the value of their homes. Unlike other loans, the debt isn’t immediately due. Instead, payment is deferred until the borrower either dies or sells the home, at which point the debt comes out of their estate or sale.
“In the right circumstances, a reverse mortgage can be a really nice thing for older homeowners in retirement,” said Tom Kronen, an advisor at Mutual of Omaha’s Montecito office who has specialized in this type of loan for almost 20 years. He often works with multiple family members and also prefers to get a trusted advisor involved, whether an attorney, accountant, or financial advisor. “This is much more of a relationship business than the traditional one between a broker and client,” said Kronen.
A reverse mortgage should not be seen as a silver bullet for financial survival, and Kronen does not suggest using it as a “stand-alone product.” He explained, “So you are utilizing home equity, but it’s better if you utilize home equity in coordination with retirement income and other assets.”